Spain is holding the rotating EU presidency in the first half of 2010 and Agricultural Minister Elena Espinosa is using the period to raise calls for higher levels of EU support to its farmers as the reform of the costly Common Agricultural Policy (CAP) continues through the outlook period.

According to Spain Agribusiness Report Q2 2010 from Companies and Markets, Spanish farmers are currently struggling across the board, but perhaps no agricultural sector is suffering more than sugar. Sugar consumption should remain stable given the fact that Spain is a developed country and that sugar is an established item within it. However, consumption will likely be curtailed slightly given rising health-consciousness. To 2014, the report expects consumption to rise by a meagre 0.6 per cent. This level of growth remains nothing more than a dream for domestic sugar producers, who have been hit with decreased EU support and are now under pressure from African, Caribbean and Pacific (ACP) sugar producers, who are now being given preferential access to EU markets. Latin American sugar producers are being afforded the same treatment. While Spanish firms took notice and began a process of sector consolidation to try to maximise efficiency, the report's authors predict a pronounced production decrease of 50 per cent from now until 2013/14.

Domestic dairy producers are feeling the same crunch. While the Spanish government tried to align milk prices with indexed retail demand. However, this will unlikely mitigate farmer concerns with falling milk prices (which dropped 13 per cent between 1 January and mid-March) and CAP quota reforms that will no longer provide such lucrative subsidies based on production levels. Based on this, a slight decrease in production output is predicted, which is expected to fall 6.96 per cent to 6.8 million tonnes. Despite this contraction, given that milk consumption is forecast to decrease 5.8 per cent to 3.6 million tonnes, which will leave a large surplus within the country. Eventually, a greater chunk of this surplus production may be directed towards cheese, where output levels are currently well-below consumption levels, which are expected to grow by 15 per cent to 2014 – by far the biggest increase for any domestic dairy product.

Two sectors that should see growth over our forecast period are in livestock and grains. The report predicts a massive jump in barley production from now until 2013/14 of 90.0 per cnet, as a greater percentage of domestic acreage is planted with the crop. Similarly corn production, which contracted by 21.1 per cent between 2005 and 2009, will improve markedly, mainly because of its potential to develop sustainable fuels at a time when such considerations are increasingly pertinent globally. Output is forecast to increase by 30.3 per cent to a reasonable 4.97 million tonnes by the end of the outlook.

Regarding livestock, the report's authors believe the pork sector possesses the greatest expansion potential and this will stay the case over the next five years, given its place in the national diet and reputation for high quality. Output is predicted to increase by 6.99 per cent to almost 3.48 million tonnes by 2013/14 – higher than forecasted growth for both beef (2.25 per cent) and poultry (1.45 per cent).

Further Reading

-

You can view the full report (fee payable) by clicking here.